Don’t Negotiate Unknowns

Like most people (me included) we feel better knowing that we didn’t pay full price for large ticket items. But this doesn’t always benefit the customer. If you think about it, most of us just want to pay a fair price and not get taken to the cleaners by an unscrupulous sales person.

It’s not a crime to haggle your way to the best possible price – but in the case of building a custom home, or undertaking a substantial renovation project there are many ways for contractors to cut corners. The customer only wants to pay a certain amount so a contractor simply lowers their quality standards. It does become a crime however, when the customer is unaware.

The real issues, in my opinion, are transparency and accountability.

Quality materials cost what they cost. The only other two factors in a proposal are labour costs and profit. Contractors will typically give you a ballpark estimate for materials and labour – but rarely do you have any idea what the profit margin is on the project.

In the customer’s mind they are trying to negotiate down the ‘unknown’ profit margin – while an unscrupulous contractor is simply cutting corners on quality to win the job.

Years ago we decided to take a different approach. In our proposals we cost out customer home builds and major renovations down to the 2×4 studs (I kid you not). More importantly we have a clearly established profit margin that we share with all our customers. Equally important is the accountability on the accounting end of the project – the client has access to copies of all project receipts.

Full and complete disclosure is the only way to build trust. It’s an in depth and arduous process on our end, but we believe our clients love us for it. If your contractor is not willing to show you, it’s because they haven’t really crunched the numbers to that level of detail – or their profit margins are out of whack.

Rather than negotiating with unknowns, the better solution may be to ask the question; “Are you willing to show me EVERYTHING my money is paying for, including your profit margin?”.